Wednesday, January 23, 2008
The district already is
paying back a $15 million state solvency loan.
By HAROLD GWIN
VINDICATOR EDUCATON WRITER
YOUNGSTOWN — The city school district’s new treasurer said Youngstown needs to borrow an additional $6 million to $8 million from the state to avoid a general fund year-end deficit this fiscal year.
William A. Johnson, who took over the treasurer’s post this month, told the school board finance committee Tuesday that without additional solvency loan assistance, the district is looking at a $6 million budget deficit as of June 30.
Youngstown, which was placed under fiscal emergency by the state in November 2006, borrowed $15,025,000 from the state in a solvency loan last fiscal year to cover a general fund deficit.
The state set up a Financial Planning & Supervision Commission to oversee all district spending as Youngstown seeks to recover financially.
Johnson told the committee he has begun the process of reapplying for solvency fund assistance, explaining that the state requires school districts to end their fiscal year in the black.
Youngstown is now halfway through this fiscal year and the general fund is showing a $724,000 deficit. That red ink will grow to about $6 million by the end of June unless there is an influx of revenue, Johnson said.
The school district has a 9.5-mill tax levy on the ballot in March, but, even if it passes, it won’t produce any new revenue this fiscal year.
The school board, however, could opt to borrow against future tax revenues it will produce, should voters approve the levy.
Johnson said a better approach might be to persuade the state to grant a second solvency loan the district can pay back interest-free.
Youngstown is repaying the first loan over a two-year period through deductions in its state subsidy allocations.
One-half of the money — $7,513,000 — will be repaid as of June 30, and Johnson said he would like to ask the state for permission to borrow that amount again and to extend the debt service for a third year.
The state will continue the solvency loans if the school district’s financial recovery plan is acceptable, he added.
Youngstown’s recovery plan, in addition to making extensive reductions in spending, requires the passage of the 9.5-mill tax levy.
Roger Nehls, chairman of the state Financial Planning & Supervision Commission, has warned that the school district can’t borrow its way out of debt and must secure additional funding as well as continue to reduce spending as it seeks a return to solvency.
gwin@vindy.com